Articles

Slavishly Applying Segmentation To Retail Doesn’t Work.

I’ve worked with segmentation a long time. Being amongst a small team of people who brought the original Yankelovich attitudinal segmentation model developed in the 1970’s to Australian retail over 30 years ago – and having worked with varying segmentation models all that time – there are a multitude of lessons you learn on the application of theory to practice. While we all applaud the challenge to the status quo and the advance made through the development of fresh thinking, there are simply some theories that do not work in practice or are too complicated to be operationalized.

Segmentation works on the principle that not every customer is the same. That theory was first espoused at a time when people formed into relatively chunky ‘tribes’ due to a need to ‘fit in’ to a group. Fast forward 40 years and today that isn’t quite as easy. Today we want to stand out as individuals and clustering together segments has become a lot more complex and requires greater amounts of skill to do and to use.

For retail the core applications of segmentation have always been in the areas of product development and communication.

In those two areas the nuances of individual segments indicate critical insight that triggers the development of new products and services that meet needs and wants previously un-realised and helps develop language that appeals to target audiences in a more intimate, emotional and stimulating way. The complication for retail begins once the product and the communication have been developed.

After all, once the product goes on sale economics dictates that we try to optimise the gross sales and profit. Retail channels cannot deal in segmentation in the field. You can recruit staff to a profile but at the end of the day, customer segments don’t walk through the door to buy, customers do. And they come in all shapes and sizes, in all sorts of moods and all sorts of physiological complications.

I have seen many retail businesses tie themselves up in knots trying to train their store staff about a ‘customer profile’ that in truth doesn’t exist and in application leads to the annoyance of the real customers the store staff have to deal with. While e-commerce can use an infinite set of algorithms to deal with the issue and virtually recreate millions of options on a page view, bricks and mortar retailers dealing face to face with a sea of human beings do not have that option.

Segmentation works very effectively when in the tight confines of product development and communication. But after that, retail needs to do what retail does best. Sell the product to the customers and consumers that walk through the door. Every day. No matter the conditions or circumstances. In the most productive way possible.

That requires human connection and thinking on your feet and that is a million miles away from the sterile, controlled environment of theory. I know. I learned the hard way.